Kathmandu: Life and non-life insurance companies have to raise Rs. 65.26 billion for their increased paid-up capital requirement as per the new provision unveiled by the Insurance Board(IB).
The Insurance Board on Thursday directed the life insurers to increase the minimum paid-up capital to Rs. 5 billion and the non-life insurers to Rs. 2.5 billion.
The IB has been directed to submit a capital increment plan within the next 30 days. The insurers are obliged to secure the paid-up capital by the Year 2023. During this period, insurance companies can raise the additional required capital through rights, bonus shares, and merger plans. As the regulatory authority has given a period of only one year, the insurance companies have to raise money with great results. In which the promoter shareholders will be hit the hardest.
At present, insurance companies have a paid-up capital of only Rs. 64.73 billion. Most insurance companies may need to issue more than 100 percent of their current paid-up capital. Based on the existing capital, state-owned Rastriya Beema Company has to increase its capital by 837 percent. At present, the company has a total capital of only Rs. 266.6 million which is the lowest paid-up capital among non-life insurers.
Among Life insurance companies that have yet to float IPO in the market are under excess pressure for the paid-up capital requirement. The Citizen Life, Sun Nepal Life, Mahalakshmi Life, Reliable Nepal Life, and IME Life have to add 275 percent of their existing paid-up capital to issue the primary shares.
Shikhar Insurance Company is currently issuing 30 percent of its shares as Right Share. The paid-up capital of the company will reach Rs. 2.28 billion after the issuance of right shares. The company has yet to declare a dividend from last fiscal year’s profits. After the declaration of the dividend, the company will be able to easily raise the minimum paid-up capital of Rs 2.5 billion.
IME General is currently issuing 40 percent of its shares through right shares. The paid up capital of the company will reach Rs.1.70 billion after the additional capital added by right shares and the dividend declared. Even so, IME General has to sell additional 43 percent of its shares as of now.